Tariff regulations²⁴

Resolution 514/2013/R/gas – “Regulation criteria for natural gas transportation and dispatching tariffs for the 2014-2017 period”

With this resolution, published on 15 November 2013, the Electricity, Gas and Water Authority defined the regulation criteria for natural gas transportation tariffs for the fourth regulatory period (1 January 2014 – 31 December 2017).

The valuation of the net capital invested (RAB) is based on the revalued historical cost method. The rate of return on net invested capital (WACC) was set at 6.3% in real terms, before taxes, for investments made up to 31 December 2013, and at 7.3% in real terms, before taxes, for investments made after that date, in order to mitigate the impact of the “regulatory lag” in the recognition of new investments made in year n, which are incorporated into the tariff for the year n+2. A revision of the WACC will also be introduced halfway through the regulatory period via an update solely of the return from risk-free assets.

New investments made from 1 January 2014 onwards will earn a return that is between 1 and 2 percentage points higher than the variable basic rate (WACC), depending on the type of investment, for a period of 5-10 years.

The method for updating the price cap tariffs is applied only to revenue relating to operating costs, which is updated for inflation and reduced by an annual recovery coefficient set at 2.4%. The revenue component relating to the return and amortisation and depreciation is updated on the basis of an annual recalculation of net invested capital (RAB) and additional revenue from the higher rate of return for investments realised in prior regulatory periods. Amortisation and depreciation are calculated based on the useful economic and technical life of the transportation infrastructure.

With regard to tariff structure, the current methodology for determining the capacity/commodity split was confirmed, providing for capacity revenue to cover capital costs (return and amortisation and depreciation) and commodity revenue to cover recognised operating costs. A mechanism was introduced to guarantee commodity revenue, which provides for the adjustment of revenue that is either 4% higher or 4% lower than the base commodity revenue.

The tariff structure is based on an entry/exit model and was also confirmed for the fourth regulatory period, together with the capacity fee for the metering service.

Fuel gas is treated as a pass-through cost which is payable in kind by users.

Lastly, the Authority calculated the amount payable to the Company for higher costs incurred due to the implementation of measures introduced by Legislative Decree 93/11²⁵ and Resolution ARG/gas 45/11, “Regulations governing the balancing of economic merit of natural gas”, as €6.5 million.

Resolution 603/2013/R/gas – “Approval of the tariff proposals for natural gas transportation and dispatching for 2014 and RTTG amendments”

With this resolution, published on 20 December 2013, the Electricity, Gas and Water Authority approved the natural gas transportation, dispatching and metering tariffs for 2014.

The tariffs were determined on the basis of recognised core revenue, equal to €1,969 million (of which around €135 million related to a greater return on development investments).

The RAB as at 31 December 2012 for transportation, dispatch and metering amounts to €14.8 billion.

Resolution 584/2014/R/gas – “Approval of the revenue recognised for the natural gas transportation and dispatching service for 2015”

With this resolution, published on 28 November 2014, the Authority approved the revenue recognised for the transportation, dispatching and metering service for 2015.

Revenue recognised for the natural gas transportation, dispatching and metering service for 2015 amounted to €1,985 million.

The RAB as at 31 December 2013 for transportation, dispatch and metering amounted to €14.9 billion.

Resolution 608/2014/R/gas – “Approval of the natural gas transportation and dispatching fees for 2015”

With this resolution, published on 12 December 2014, the Authority approved the transportation, dispatching and metering tariffs for 2015, as calculated based on the recognised revenue approved with Resolution 584/2014/R/gas.

Post-balance sheet events

Constitutional Court – Ruling 10/2015

On 9 February 2015, with Ruling 10/2015, the Constitutional Court declared the unconstitutionality of Article 81, paragraphs 16, 17 and 18 (the additional corporation tax known as the “Robin Hood Tax”) of Decree Law No. 112 of 25 June 2008, “Urgent provisions for economic development, simplification, competitiveness, stabilisation of the public finances and tax standardisation”, which was converted into law, with amendments, by Article 1, paragraph 1 of Law No. 133 of 6 August 2008, as subsequently amended. The unconstitutionality takes effect, as set forth in the ruling, from the day after its publication in the Italian Official Gazette, i.e. 12 February 2015. The impact of this ruling on the Snam Group is described in the “Financial review” section.

Pineto incident

The public prosecutor of Teramo has opened an investigation in relation to the incident that occurred on 6 March 2015 near the town of Pineto, concerning a gas leak in a section of pipeline. The reasons for the leak and subsequent fire are being examined. In the short term, the infrastructure was secured by stopping the gas leak and facilitating the extinguishment of the fire.

Snam Rete Gas is actively cooperating with the relevant authorities.